Markets to make some recovery with a positive start

The Indian markets corrected in last session after surging for two consecutive days, mainly dragged by the rate sensitive stocks as the rate cut hopes faded after Reserve Bank of India (RBI) chief D Subbarao raised concerns about high inflation. He reiterated that reducing inflation is his priority now and will remain so in future, hence the traders’ mood is likely to remain cautious. The start today is likely to be positive and the markets may recover some lost ground of last session as the global cues have turned positive. However, the overall, trade may continue to remain in a range and quarterly earnings will dominate the session. Traders will be cautious as market regulator Securities and Exchange Board of India has opined that a very small section of people - from markets and companies - controlling price-sensitive information is a matter of concern and there should be a way to pass on such information to the wider public. There will be some buzz in the PSU stocks as the government is expected to take up a proposal to alter the nature of the National Investment Fund (NIF), which was initially set up to finance selected social sector schemes and meet the capital investment requirements of profitable and revivable PSUs. The beleaguered aviation sector too may see some upmove as the Airport Economic Regulatory Authority (AERA), the regulator that looks into an airport’s financial issues has approved collection of user development fee (UDF) from passengers departing from the Mumbai airport.

The US markets made a mixed closing though there was good earnings report from the top two banks and there was slew of upbeat economic data, still traders remained concerned about the global economic growth outlook. The Asian markets have made mostly a green start with Japanese market taking the lead as the yen’s drop boosted the outlook for Japanese exporters. The Chinese market was a bit cautious ahead of the GDP numbers announcement tomorrow.

Back home, Wednesday turned out to be a disappointing session of trade for the Indian equity markets, as investors booked profit after previous two sessions of rally in absence of any major positive trigger. The frontline gauges, after a choppy start, remained range bound for most part of the session and drifted to lower levels in the last leg of trade to settle with a cut of about a percent. Though, the bourses tried to keep their head above water but, the psychological 20,000 (Sensex) and 6,050 (Nifty) levels proved as stern resistances as the key indices could not claw beyond those levels, instead drifted lower. Sentiments got dampened on concerns over global growth recovery after World Bank cut its global growth forecast for this year, as austerity measures, high unemployment and low business confidence was dampening economies in developed nations. The European markets also played spoilsport as they undermined sentiments by opening on a weak note after the outgoing chairman of the Euro group of euro-zone finance ministers warned that a strong euro could hurt the region’s economy. Back home, interest rate-sensitive’s fell on Reserve Bank of India (RBI) Governor D Subbarao’s statement that India’s inflation has come off a peak but is still high, weighed on expectations for a rate cut later this month. Also, some nervousness came in due to selling in banking counters as International Monetary Fund said that India’s financial system has been made vulnerable by deterioration in bank assets and a lack of capital as the economy slowed.  Some selling pressure also came in from retail stocks like Provogue India, Shoppers Stop, Trent and V2 Retail as Fitch Group maintained a negative outlook on the Indian retail sector for 2013, saying that slowdown has started hurting retail sector due to waning consumption owing to rising inflation and other macroeconomic factors. Auto sector too dampened the sentiments by losing about two and a half percent led by over three percent fall in Tata Motors after the company’s global sales in December 2012 declined by 13.88 percent to 98,968 units against 114,920 units sold during the corresponding month in 2011. Meanwhile, Bajaj Auto slipped by two percent after reporting almost 100 basis point (bps) drop in operating margin for the third quarter ended December 2012 as compared to the previous corresponding period. However, losses remain capped on the back of about half a percent gain in Oil & Gas space. Index heavyweight, Reliance Industries, ending higher over a percent, mainly spurred buying in Oil & Gas counter. Finally, the BSE Sensex lost 169.19 points or 0.85% to settle at 19,817.63, while the S&P CNX Nifty declined by 54.75 points or 0.90% to end at 6,001.85.